Walgreen plans to keep its roots firmly planted in the United States, saying it will no longer pursue an overseas reorganization of the company that would have trimmed the amount of U.S. taxes it pays.
The nation's largest drugstore chain said early Wednesday that as previously planned, it will buy the remaining stake in Alliance Boots that it does not already own, but it will not pull off an inversion with the Swiss health and beauty retailer.
The Deerfield, Illinois, company said it is not in the best long-term interest of its shareholders to re-domicile outside the United States.
Illinois Sen. Dick Durbin and Chicago Mayor Rahm Emanuel both issued statements Wednesday praising the company for its decision.
Shares of Walgreen Co. fell Tuesday on media reports that the nation's largest drugstore chain will not reincorporate itself overseas — a politically touchy move that could have significantly lowered its tax bill.
Walgreen owns a 45 percent stake in Alliance Boots, the largest drugstore chain in the United Kingdom. Walgreen has said it will soon announce whether it will acquire the remaining stake of the company. It has been considering whether to use an organization technique called an inversion to take advantage of the U.K's lower corporate tax rate.
Citing unidentified sources, Sky News of the U.K. on Tuesday first reported that Walgreen would acquire Alliance Boots without moving its tax base overseas.
The reports come as President Barack Obama and members of Congress denounced inversions as an unpatriotic trick used to dodge U.S. taxes.
In an inversion, a U.S. business combines with a foreign company in a country with a lower tax rate, allowing the company to lower its tax bill. Frequently the companies maintain their U.S. headquarters and operations, and the U.S. entity often maintains control of the company.
Dozens of U.S. companies have completed inversions in recent years, and they're especially popular with health care companies that have extensive overseas operations. But elected officials have raised concerns about the tax revenue the federal government is losing as a result of the deals.
At 35 percent, the United States has the highest corporate income tax rate in the industrialized world. The U.S. also taxes income that's earned overseas but brought back to the U.S.
While some Democrats are pushing to make it harder for U.S. firms to reincorporate overseas, Republicans argue that Congress should lower the corporate tax rate so that businesses won't feel the need to leave the U.S.
On Tuesday, the Treasury Department said that legislation from Congress is the only way to address the problem fully. However, since inversions are eroding the U.S. tax base, the Obama administration plans to seek ways to provide a partial fix without requiring new laws from Congress.
Walgreens Co. runs more than 8,200 drugstores in the U.S.
Company shares fell $2.99, or 4.2 percent, to close at $69.12 in trading Tuesday. They added 1.3 percent to $70.01 in after-hours trading.